Ella 
In Monday’s London session, the Pound Sterling (GBP) held onto gains just below the key psychological resistance level of 1.3000 against the US Dollar (USD). The GBP/USD pair showed resilience amid growing market expectations that the Federal Reserve (Fed) will commence interest rate cuts starting from its September meeting.
Market Dynamics
Fed Rate-Cut Expectations: Confidence among investors that the Fed will initiate interest rate reductions in September remains robust. This sentiment strengthened following the release of US Producer Price Index (PPI) data for June, which showed higher-than-expected inflation rates due to increased service costs.
US Dollar Performance: The US Dollar Index (DXY), reflecting the Greenback’s value against major currencies, advanced near the 104.00 mark. This gain was driven by safe-haven demand stemming from geopolitical tensions after an alleged assassination attempt on former US President Donald Trump. The incident heightened speculation that Trump might fare well in the upcoming US Presidential elections.
Market Sentiment: Despite the near-term support for the US Dollar, investors anticipate a downward trajectory as the Fed is widely anticipated to lower borrowing rates in response to slowing inflation and labor market indicators.
Key Economic Indicators
US Retail Sales: Market attention is focused on the release of US monthly Retail Sales data for June, scheduled for Tuesday. Economists forecast no change in Retail Sales following a modest 0.1% increase in May.
UK Inflation: In the UK, market participants are closely monitoring inflation data. Recent economic indicators suggest robust economic activity, potentially influencing the Bank of England’s (BoE) monetary policy decisions.
Conclusion
Investors and traders should closely monitor developments related to Fed rate-cut expectations, US economic data releases, and geopolitical factors influencing currency movements. The Pound Sterling’s resilience near the 1.3000 level against the US Dollar underscores market anticipation of monetary policy divergence between the Fed and other central banks.
